ICAC: Inquiry told Senator Arthur Sinodinos was warned about Australian Water Holdings

An inquiry has heard Senator Arthur Sinodinos was warned about a water company at the centre of an Independent Commission Against Corruption (ICAC) investigation.

ICAC is looking into allegations that between 2004 and 2012 Australian Water Holdings (AWH) falsely billed Sydney Water for expenses on an infrastructure project, and used the money for executive salaries and political donations.

The inquiry has previously heard Senator Sinodinos was on a salary of over $200,000 as a board member of AWH and stood to make millions from a deal with Sydney Water.

The senator was on the AWH board until he resigned to enter Federal Parliament in 2011.

He stood aside as assistant treasurer last week while the inquiry into AWH continues.

Former Sydney Water boss Kerry Schott told the inquiry Sydney Water warned Senator Sinodinos about AWH.

Kerry Schott: "Too much money was being spent. We were not aware of what it was being spent on."

Geoffrey Watson: "Did you also raise with Mr Sinodinos, on a personal level, the effect his association with the company might have?"

Schott: "We suggested to Mr Sinodinos he might be careful with the company he was keeping. We thought that they may be dishonest."

Watson: "And what was his reaction to that?"

Schott: "There was no reaction."

Senator Sinodinos is expected to face ICAC next weekto answer questions about AWH.

Dr Schott also told the inquiry the ex-New South Wales premier Nathan Rees described AWH as "a bunch of crooks".

Long-running contract dispute

During Dr Schott's tenure there was a long-running dispute between Sydney Water and AWH.

Under a deal AWH signed, it could claim back all of the costs associated with providing infrastructure in Sydney's north-west.

AWH also said the agreement it signed gave it exclusive rights to further work.

But Sydney Water knocked back the proposal.

"I thought the basic idea was not going to fly because it was carving out part of a network," Dr Schott said.

When the deal faltered, AWH charged its legal fees for arbitration back to taxpayers.

AWH tried to get around the Sydney Water boss by lobbying New South Wales politicians over the deal.